Chapter 1 IE

agglomeration economies

a rich country specializes in manufacturing niches and gains productivity through groups of firms clustered together, some producing the same product and others connected by vertical linkages

globalization

the process of greater interdependence among countries and their citizens

law of comparative advantage

when each nation specializes in the production of that good in which it has a relative advantage, the total output of each good increases; thus, all countries can realize welfare gains

openness

the ratio of a nation’s exports and imports as a percentage of its gross domestic product (GDP)

economic interdependence

all aspects of a nation’s economy are linked to the economies of its trading partners